As of June 16^th 2009, California’s Foreclosure Prevention law took effect.  This law says a bank can’t foreclose on a mortgage without trying to renegotiate the terms of the loan or giving three months notice to the homeowner.

This bill was passed in February, and is very much like President Obama’s HAMP (Home Affordable Modification Program) plan which began in March.  HAMP is a $75 billion home loan modification initiative making it easier for homeowners to qualify for a home loan modification.  Both of these are designed to encourage banks to work with homeowners using payment plans or home loan modification.

“California is ground zero for foreclosures. We’re getting about 80 to 90,000 foreclosure filings every month. That’s one every 30 seconds, so until we start mitigating the number of foreclosures, our economic recovery is going to be hampered,” –Assemblyman Ted Lieu.  Author of the California Foreclosure Prevention law

What this means is that banks are going to need to attempt to work with homeowners through home loan modification.

Home loan Modification is when the bank agrees to a change in the terms of the mortgage.  These changes can include lowering the interest rate, and/or changing the rate from variable to fixed.  A lowering of initial principal of the loan, and an extension of the duration of the loan are also possible with a home loan modification.

If the lender doesn’t renegotiate the borrower still has 90 days until the bank can step in and seize the house.  This will allow the borrower a little time to think of an alternative such as negotiating a short sale with the bank, or consulting a professional home loan modification specialist.

A short sale is when the homeowner sells the house for less than its value, and the bank accepts the money and erases the rest of the debt.  Banks will sometimes do this because it is preferable to them owning a house it may take months to sell under in the current housing market.  (A market they helped to create incidentally, but that is another story.)

A home loan modification specialist is just what the name suggests.  A person or group who specializes in home loan modifications, and the laws and regulations surrounding them; who can help the homeowner  navigate their way though a home loan modification process.

Whatever approach you take to solving your foreclosure problem, it is important to act quickly.  Each day you delay is a day closer to losing your home, and no one wins in that situation.

To learn more about home loan modification visit Legal Loan Bailout.